The Archbishop of Wales has waded into the row over dairy prices by saying shoppers must be prepared to pay more for their milk.

Farmers and processing firms went head to head this week at the UK’s biggest agricultural event the Royal Welsh.

After hours of talks, the two sides emerged saying they both had agreed to sign up to a new, but voluntary, code of conduct.

UK ministers have not ruled out bringing in legislation should the new system not prove successful.

But Wales’ most senior Anglican clergyman Dr Barry Morgan insisted everyone was responsible for ensuring farmers got a “fair price” for their milk – not just the dairies and major supermarkets.

The Archbishop said: “It is astounding people will pay £1.98 for a two-litre bottle of Coke and think they’ve got a good deal while squabbling over the cost of milk which at £1 for 2.27 litres is half the price of Coke.

“In some places a bottle of water is twice the price of a pint of organic milk.

“It is shameful and immoral it now costs many farmers more to produce milk than they are able to sell it for.

“That is clearly promoting a culture which is unfair, unsustainable and unhealthy.

“We are short-changing our daily farmers and that is a matter of justice and morality.

“We are all responsible and we all have to be prepared now to pay a fair price for a quality product because Fair Trade begins at home.”

Following yesterday’s deal, several farming unions welcomed the new code of conduct – but said it still did not solve the long term problem facing many milk producers.

According to not-for-profit farming research group DairyCo, the retail price of liquid milk is currently at its lowest level for more than seven years.

The average cost was 55.5p per litre in 2011-12, down 4.6% on the year before.

While that may be good news for shoppers, many of whom face a squeeze on their household budgets, dairy farmers say the price they are paid does not cover their production costs – and could force many out of business.

The issue has sparked anger across rural Britain – and last week culminated in a series of blockades at plants near Bridgwater, Somerset, Droitwich Spa in Worcestershire and Market Drayton in Shropshire.

Campaign group Farmers for Action (FFA) has vowed to continue its protests aimed at disrupting milk supplies if no progress was made in increasing the amount producers were paid.

Mark Evans, Devon spokesman for FFA, said: “This deal is a little way towards our campaign, but until we get the powers sitting down at the table and agreeing a sustainable price our campaign will continue.”

A coalition of farming unions – including the National Farming Union (NFU) - said they were committed to putting 100% effort into targeting retailers and all major buyers of milk to ensure dairy farmers are paid a fair price.

In recent days, Morrisons and the Co-operative have both agreed to increasing their milk price to cover the cost of production.

NFU President Peter Kendall said attention was now focussed on Asda, which he said increased its milk price last week but still fell below the cost of production.

“The farming community is more united than ever before and the strength of feeling on this dairy issue is increasing and not decreasing,” he added.

“We will spend the rest of this month collectively throwing 100 per cent of our efforts into to reversing the price cuts from earlier this year and rescinding the ones on the horizon on August 1.”